2024 was record year for bulk annuities, data shows

In a new report, consultancy giant WTW said combined bulk annuity and longevity swap volumes reached £60bn. This consisted of approximately £52bn worth of bulk annuity deals and £8bn in longevity swaps. 

If these projected figures are confirmed, it would mean 2024 was another record year for bulk annuity transactions, exceeding 2023’s £49.1bn figure. 

Rhys Mellens, director at WTW, said the data implied that the past two years were “the busiest ever in the market by some margin”. 

There were 137 transactions in the first half of the year, a record number for a six-month period, he said, “with no signs of momentum fading in the second half”. 

“Insurers have demonstrated remarkable adaptability in keeping pace with sustained high levels of market demand, bolstered by the entry of new insurers that will help expand overall supply,” Mellens said. 

“Meanwhile, existing insurers remain well-capitalised and have been increasing their resources and streamlining processes to ensure they have ample capacity to accommodate growing deal flow and their associated back-office requirements as schemes gear up to move to buyout.” 

In a separate report, PwC explained that the first half of 2024 was “slower than expected” in terms of total volumes, despite the high number of deals completed. This led to an increased appetite among insurers to “win market share and complete deals”. 

This led to “highly competitive pricing” in the last three months of the year, boosted by improved reinsurance terms and “optimised” investment strategies, PwC said. 

“A number of January 2025 deals have locked in this attractive pricing, but it is unclear if insurer appetite will persist for new transactions,” the report stated. 

WTW sees de-risking markets worth £70bn in 2025

Elsewhere in its report, WTW forecast that the bulk annuity and longevity swap markets will exceed £70bn in total this year amid continued high demand from defined benefit (DB) pension schemes. 

The firm said it expected bulk annuity market activity to reach approximately £50bn for the year, in line with the past two years and other firms’ expectations. 

On top of this, longevity swap deals will total £20bn as pension schemes seek to insure against the risk that members live longer than expected, WTW said. 

In a new report, WTW said: “While a number of well-funded schemes may plan to run-on for longer in order to take advantage of improved access to surplus, many of those will use longevity swaps as part of that process in order to manage their risk.” 

Stable market conditions over the course of last year, coupled with recent gilt yield increases, have led to further improvements in DB pension schemes’ funding levels, according to Shelly Beard, managing director in WTW’s pension transactions team.  

She added that trustees and pension scheme sponsors had been addressing issues with illiquid assets and cleaning up data, improving their attractiveness to insurers. Meanwhile, insurer pricing “has remained attractive for schemes of all sizes”, Beard said. 

“All of this is culminating in more schemes being ready to approach the insurance market to undertake full scheme buy-ins, with the increase in demand expected to be met in part by the increase in participants in the market,” she said. 

Royal London has completedseveraldeals since entering the market last year, while Utmost Life & Pensions announced its first bulk annuity transaction in November.  

US firm Brookfield is expected to enter the market this year and has set up Blumont Annuity Company as a UK entity to handle this business. It is currently awaiting regulatory approval from the Prudential Regulatory Authority. 

In addition, LCP has said at least one new superfund provider will complete its first transaction this year, after Clara Pensions took on its first three schemes. 

Longevity swaps demand increases

Last year saw four pension schemes complete longevity swap deals, totalling £8bn, according to WTW’s report. 

These included the British Airways’ Airways Pension Scheme and the Merchant Navy Ratings Pension Fund. 

“We believe it is important for pension schemes to consider their approach and develop a clear strategy for managing longevity risk.”

Cobus Daneel and Stephen Caine, WTW

The longevity insurance market was getting more competitive, WTW reported, which was leading to attractive pricing. In addition, uncertainty over future mortality trends was also increasing demand for longevity swaps. 

Cobus Daneel and Stephen Caine, directors at WTW, warned that this uncertainty “may mean that pension schemes are currently holding increased levels of longevity risk”. 

“We believe it is therefore important for pension schemes to consider their approach and develop a clear strategy for managing longevity risk – whether this is to self insure or hedge it through entering a bulk annuity or a longevity swap,” they stated in the report. 

Beard added: “The proposed Mansion House reforms have led to a number of pension schemes with strong sponsors taking a fresh look at their long-term target and deciding that running on for longer may be the preferred way forward, with a longevity swap used as a means of mitigating a key remaining unrewarded risk.” 

WTW also forecast “continued development and innovation” for smaller pension schemes seeking to secure an insurance deal, driven in part by new entrants.